China’s Lending Benchmark Decline to Help Bolster Economic Recovery
China’s benchmark lending rates declined on Tuesday, signaling renewed efforts by authorities to stimulate economic momentum amid global uncertainties.
The one-year loan prime rate (LPR) was lowered from 3.1 per cent to 3.0 per cent, while the over-five-year LPR, which is widely used as a reference for mortgage rates, dropped from 3.6 per cent to 3.5 per cent, according to the National Interbank Funding Centre.
This marks the first LPR cut in 2025 and is expected to reduce borrowing costs for businesses and consumers, boost market confidence, and support the steady growth of the real economy.Analysts say the move demonstrates China’s resolve to stabilise expectations and economic activity.
The LPR is a key reference rate used to price various loans, including consumer, business, and mortgage lending. Lower rates ease the financial burden on borrowers, potentially leading to greater investment and consumption.
For example, a standard commercial mortgage of 1 million yuan (approximately 140,000 dollars) over 30 years will now cost borrowers over 50 yuan less in monthly interest payments — amounting to savings of nearly 20,000 yuan over the life of the loan.
The LPR cut had been widely anticipated. At a press conference on May 7, Pan Gongsheng, Governor of the People’s Bank of China, announced a 0.1 percentage point reduction in the policy rate. The following day, the central bank cut the seven-day reverse repo rate to 1.4 per cent, paving the way for the LPR adjustment.
The rate cuts are part of China’s broader implementation of a moderately loose monetary policy this year. Authorities have reiterated their commitment to timely reductions in reserve requirement ratios and interest rates to ensure liquidity and support the economy.
In April, the average interest rate on newly issued corporate loans dropped to about 3.2 per cent, down 50 basis points from the previous year. Similarly, average rates on new residential mortgages fell to 3.1 per cent, a 55-basis-point decline, both historic lows.
The downward trend extended to deposit rates as well. On Tuesday, major commercial banks cut deposit interest rates, with one-year fixed-term deposits lowered by 15 basis points to 0.95 per cent. Rates now stand at 1.05 per cent for two years, 1.25 per cent for three years, and 1.3 per cent for five years.
Tian Xuan, President of the National Institute of Financial Research at Tsinghua University, noted that the reduction in both lending and deposit rates is expected to stimulate credit demand and drive consumption and investment — injecting new vitality into China’s economic recovery.
Official data indicates that China’s economy maintained steady growth in the first four months of 2025, supported by rising retail sales, a robust services sector, resilient imports and exports, and stable industrial output and fixed-asset investment.#China’s Lending Benchmark Decline to Help Bolster Economic Recovery#
